Liability of employer for not deducting PF under Employer Provident Funds and Misc. Provisions Act, 1952

Liability to deduct PF on overtime:

For ascertaining whether to deduct PF on particular component of Basic Wages one has to determine:-

Whether the payment which has been made to a workman / employee in respect the period which does not fall within normal duty hours or within over time hours would be said to be overtime allowance or is a payment of similar nature to fall within the category of similar allowance payable.

Over time allowance as generally understood and defined under factories act 1948 means working in a factory for more than 9 hours in any day or for more than 48 hours in any week, and shall, in respect of overtime work, be entitled to receive wages at the rate of twice his/her ordinary rate of wages. Further, no worker can work more than 10-1/2 hours a day. In essence, worker working more than 48 hours in a week shall be paid overtime with the rate of double wages and further overtime hours can not in any case exceed 24 hours in a week.

The PF is deductible on all emoluments which are earned by an employee while on duty excluding specifically overtime. As mentioned above overtime could only limited within the range of 48 hours in week to 72 hours work in a week. [1 week = 6 days]

Any payment to worker for work more than 72 hours is not overtime and hence PF deduction liability is not applicable on the same.

PF is not liable to be deducted on salary / wages payable to trainees:

In industries it is observed that trainees are deployed within the floor of industry and skilled and developed workmen is again kept on permanent pay roll of the industry. In such cases PF is not deducted on whatever amount is being paid to such trainees if following conditions are met:

Training has been introduced with a view to impart training to persons with specified qualifications.

Minimum qualification and training period has to be mentioned in the training scheme. However, manager may reserve its right to determine the period of training to a particular trainee if they find that there is no proper response from the trainees.

Trainees are being paid a consolidated stipend. This may increase year after year during the period of training.

No other benefit, except for stipulated stipend, shall be paid to such trainees.

Trainees should be recruited for a specified period under the scheme.

There should not be any guarantee for their employment in the company after the completion of their training period.

Training may be terminated at any time without any notice or reason if trainees are found to be medically unfit or unable to accommodate with training environment.

Non-payment of contribution – Recovery can’t be done from director working in the professional capacity:

In case director was not in the position to control financial and managerial aspect of the company, it is wrong to enforce recovery from such director for the default made by the company.